Increased Obligations To Be Introduced in Supply Chains

Commercial organisations in the UK with a turnover of £36 million or more face increased obligations of transparency in their supply chains, following the publication by the UK Government of its response to a review of the Modern Slavery Act 2015.

The response is particularly significant to organisations in the public sector, who are set to be brought within the scope of transparency obligations in the Act for the first time. The changes which the UK Government proposes to make to the Act will also be relevant to any other organisations who are subject to those obligations.

Section 54 of the Modern Slavery Act 2015 requires commercial organisations who supply goods or services and have a total turnover of £36 million or more to publish a slavery and human trafficking statement. This statement must set out the steps that an organisation has taken to ensure that slavery and human trafficking is not taking place in its business or supply chains or must say that the organisation has taken no such steps. The Act does not expressly say that section 54 applies to the public sector but some public sector organisations have interpreted section 54 as applying to them or have decided voluntarily to publish slavery and human trafficking statements as a matter of good practice. The Government consulted on proposed changes to this obligation in 2019, following the publication of a report of an independent review of the Modern Slavery Act 2015. The Government published its response to the consultation in September 2020.

The Government proposes to extend the application of section 54 of the Modern Slavery Act 2015 to apply to public bodies with a budget threshold of £36 million or more. Their statements will need to be signed off by the accounting officer, chief executive or equivalent role and approved by the senior management body. Public bodies will be allowed to publish group statements and the Government will publish guidance to help public bodies decide when and how to report as a group.

Other actions proposed in the Government’s response include:

• • Introducing mandatory requirements as to the subjects which must be covered in slavery and human trafficking statements. Section 54 of the Modern Slavery Act 2015 currently says that statements may cover the following subjects:
    • An organisation’s structure, business and supply chains.
    • Its policies in relation to slavery and human trafficking
    • Its due diligence processes in relation to slavery and human trafficking in its business and supply chains.
    • The parts of its business and supply chains where there is a risk of slavery and human trafficking taking place, and the steps it has taken to assess and manage that risk;
    • Its effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains, measured against such performance indicators as it considers appropriate;
    • The training about slavery and human trafficking available to its staff.

Government guidance indicates that the Government would expect organisations to cover such matters in their statements but the Government is now proposing to make this mandatory.

• Requiring organisations who are subject to the reporting obligations to meet a single reporting deadline.
• Requiring organisations who are subject to the reporting obligations to publish their statements on the Government-run reporting service.
• Requiring organisations to include in their statements the date of Board approval and requiring group statements to name the entities that the statements cover.
• Publishing new guidance, with examples of best practice on reporting.

The Government has also said that it will consider enforcement options and will issue a further update on this.

Some of the Government’s proposals will require amendment of legislation and will therefore take time to progress. In advance of such legislation being made, organisations should take steps to prepare for the impact on their activities. Actions to consider include:

• Public sector organisations should assess their budgets and establish whether they will be within the scope of the duty relating to transparency in supply chains when it is applied to the public sector.
• Public sector organisations should identify whether they are connected with any entities which should be included in group statements and decide whether they will publish statements as a group rather than for each entity.
• All organisations subject to the duty of transparency in supply chains should carry out of an audit of the arrangements they have in place to identify any risks of slavery or trafficking and to take action when any risks are discovered.
• Suppliers to the public sector and to organisations who ultimately have a £36 million or above turnover, should consider what impact these new obligations could have on them and should prepare accordingly. Suppliers who are above the £36 million turnover threshold will themselves be subject to the requirements of the Modern Slavery Act 2015 and will need to ensure that they have appropriate processes and access to information to comply. They may find that they have to expand such processes if customers impose more extensive obligations than they would have done previously in order to help those customers to comply with their obligations under the Modern Slavery Act 2015.